Emergent Research

EMERGENT RESEARCH is focused on better understanding the small business sector of the US and global economy.

Authors

The authors are Steve King and Carolyn Ockels. Steve and Carolyn are partners at Emergent Research and Senior Fellows at the Society for New Communications Research. Carolyn is leading the coworking study and Steve is a member of the project team.

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Emergent Research works with corporate, government and non-profit clients. When we reference organizations that have provided us funding in the last year we will note it.
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This is part of a broader trend of fewer Americans in general seeing themselves as middle class. In 2014 we reported on a Pew study showing only 44% of Americans consider themselves middle class, down from 53% in 2008. So it's not just millennials.

But the quick summary is stagnant wages, increasing costs for housing, healthcare and education and the hollowing out of middle wage jobs.

These factors are making people very nervous and even scared about the future. Key quote from the Guardian article from a millennial who's very nervous:

“I’m definitely scared, mostly because I’m paying so much for myself and for my student loans, so I can’t put that money into a nest egg,” she said. “How will I ever be able to put down money for a house? How will I be able to afford a wedding?”

This quote points out one other trend of note - weddings have become way too big a deal and way too expensive.

But I digress.

But since I'm digressing I'd like to point out that the General Social Survey is an excellent source of attitudinal trend data on Americans.

Run by the NORC project at the University of Chicago, it's been conducted every two years since 1972. We refer to it often and our managing partner even worked on the GSS at one point.

Back to economic uncertainty. We believe it's one of the most important trends impacting business and society.

The large number of people getting trapped in entry-level jobs is at least partly the fault of the overall economy. The share of workers staying in low-wage jobs at least a year rose during the 2008-09 recession and has improved only modestly since then. Other research has found that job ladders failed the wake of the recession: Workers were forced into they were overqualified for and then weren’t able to move up into better jobs the way they would during better economic times.

The article also points out minimum wage job holders are older and better educated than in the past. The article chart below illustrates this.

Most low wage jobs - and especially low part-time jobs - have few, if any, benefits. They also aren't as secure and stable as in the past and many don't even provide consistent hours.

So compared to these jobs, on-demand economy jobs start to look pretty good. Pay is certainly competitive and in most cases better than minimum wage jobs.

Yes, they don't cover social security payments, but on-demand economy jobs do provide work flexibility and autonomy - which are highly valued by many.

These people clearly see on-demand economy work as a better option than their alternatives.

I'm not saying we shouldn't provide more security and protections for on-demand economy workers. There is definitely a dark side to the gig economy and better worker protections need to be put in place.

I also agree we should be trying to figure out how to create more higher paying, "good jobs" with full benefits and job security.

But today's reality is on-demand economy jobs are better than the alternatives for many.

March 02, 2015

The Great Decoupling is a term some economists use to describe the economic decoupling of productivity, wages, jobs and GDP growth.

These 4 factors used to move more or less in unison. But as the chart below shows, starting around 2000 the growth in labor productivity "decoupled" from job growth.

But the decoupling is even broader. As the hard-to-read (sorry) chart below shows, labor productivity and GDP growth has also decoupled from median household income (it's the bottom line starting about 1990).

In other words, a growing economy and increases in labor productivity are no longer leading to as many new jobs or as much wage growth as in the past.

July 21, 2014

The New York Times article A Push to Give Steadier Shifts to Part-Timers covers the growing opposition to the practice of rrequiring workers to be “on call” at short notice or scheduling them for shifts and then sending them home if business looks light.

The issue is nonstandard work schedules makes life much more difficult, especially for those with children. Key quote:

The actions reflect a growing national movement — fueled by women’s and labor groups — to curb practices that affect millions of families, like assigning just one or two days of work a week or requiring employees to work unpredictable hours that wreak havoc with everyday routines like college and child care.

This shift to a "just in time" workforce is happening because of the rapid growth of labormetrics, which is the use of software and analytical tools to analyze, track and improve work methods and performance.

Labormetrics systems allow businesses to better match the need for employees with business demand. This cuts costs and improve efficiency, but it also results in employees having more varied work schedules and often fewer hours.

Labormetrics also allows firms to shift business risk to employees. This is yet another example of the broader trend of risk management shifting from institutions to individuals, a very important trend we cover in the Intuit 2020 report.

It also increases economic uncertainty for those who are on call. We consider growing economic uncertainty to be a major driver of change in today's economy. We'll have more on this topic over the coming months.

In the five years since the United States began its slow climb out of the deepest recession since the 1930s, the job market has undergone a substantial makeover. The middle class has lost ground as the greatest gains have occurred at the top and bottom of the pay scale, leaving even many working Americans living in poverty. The housing industry, once the primary engine of growth and a fountain of jobs, has shrunk, while health care, technology and energy have led the recovery.

A major issue with the recovery is relatively high paying industries, like manufacturing and construction, have seen overall employment declines.

At the same time, relatively low paying industries health care and food service have added workers.

February 24, 2014

According to a recent study by Pew Research, only 44% of Americans self-identify as being middle class. As the study chart below shows, this is down from 53% prior to the Great Recession.

Over the same time frame the percent of Americans saying they are lower or lower-middle class rose 15 points, from 25% to 40%. The upper class has also taken a hit, dropping from 21% in 2008 to 15% in early 2014.

The decline in the middle class has profound business impacts. At a high level, there are simply fewer opportunities for businesses that serve traditional middle class consumers. Instead, businesses are increasingly focusing on either high end consumers or those with limited incomes.

"The post-recession reality is that the customer base for businesses that appeal to the middle class is shrinking as the top tier pulls even further away ... big stores and restaurants are chasing richer customers with a wider offering of high-end goods and services, or focusing on rock-bottom prices to attract the expanding ranks of penny-pinching consumers."

A big reason for shift is the increase in job polarization, which is the growth of both high wage and low wage jobs coupled with a decline in middle wage jobs. See our job polarization category for more on this topic.

Sears, JC Penny and Olive Garden are but a few of the many examples of large firms hurt in this shift.

Small businesses that serve middle class consumers should not only be aware of this trend, but also think through what it means for their business.

In the early 1970s, just 6% of American men ages 25 to 54 were without jobs. By late 2007, it was 13%. In 2009, during the worst of the recession, nearly 20% didn't have jobs ... Although the economy is improving and the unemployment rate is falling, 17% of working-age men weren't working in December <2013>.

There’s more than one explanation, but a big factor is that – partly due to globalization and technology – the wages of less-skilled, less-educated men have been falling. Simply put, that makes them less willing to get off the couch, particularly if finding a job demands running a gauntlet of on-line applications or requires a move or a long commute or surrendering government benefits.

Brookings also has a nice summary of why this is a problem:

The costs of having so many prime age men on the sidelines of the economy can be measured in lost wages, the rising tab for government benefits, foreclosures and bankruptcies. But the costs go beyond dollars and cents ... the decline in the share of men who are working may be one reason behind the fall in marriage rates. Men without jobs don’t make very attractive mates.

We agree with this assessment and we also think this adds to the general sense of economic insecurity, which has a number of negative 2nd order effects on society.

This is a huge problem and why it's happening hasn't been fully explained - which means we also have no easy answers as to how to fix it.

December 09, 2013

There's no doubt the traditional career path of staying with a single company, or a small number of employers, and rising through the ranks until you retire is no longer viable for most people.

One option that's becoming increasingly common is the portfolio career. Based on our research, this comes in two broad flavors:

1. Spending part of a career as a traditional employee and part self-employed: This arrangement is becoming very common. According to this year's survey results from the MBO Partners State of Independence study about 40% of all adult Americans have spent part of their careers self-employed and we're forecasting 50% will have by 2020.

Now that so much work can be done flexibly, portably, and virtually, it's easy to do many kinds of work in the same workweek or even workday.

Economic security no longer exists unless you create it. Having multiple income streams is one of the best ways to create stability.

People are living and working longer, creating a large canvas on which to paint a career.

We are all craving fulfillment and meaning in our careers, so it's becoming more common to combine work for security with work that feeds a passion.

I would add another key reason, which the book probably missed due to be released prior to the Great Recession. Many are pulling together different gigs because it's the only way to make enough money to make ends meet.

The rapid growth of "gig" and peer to peer commerce sites - think TaskRabbit, Gigwalk, Fiverr, Airbnb, Uber, Etsy, Elance, etc. - is making it much easier to create portfolio careers. Job polarization and the lack of good job is making them more attractive.

We expect portfolio careers to become even more common in the coming years.

As the chart below (from the article) shows, low wage workers have been getting older and better educated.

One only has to visit a fast food store to see this. Back in the 80's and 90's the majority of fast food workers were teens. That's no longer true.

According to another New York Times article - Life on $7.25 an hour - the demographics of fast food workers is very different than 20-30 years ago. Key quote:

These days, according to the National Employment Law Project, the average age of fast-food workers is 29. Forty percent are 25 or older; 31 percent have at least attempted college; more than 26 percent are parents raising children. Union organizers say that one-third to one-half of them have more than one job — like Mr. Shoy, who is 58 and supports a wife and children.

The reason more older people are working fast food jobs is the polarization of jobs. This is the trend towards increasing numbers of low and high wage jobs coupled with decreasing numbers of middle wage jobs.

Because so many middle wage jobs have disappeared, more workers between the ages of 25 and 64 are turning to low wage jobs.

We're spending a lot of time on the polarization of jobs. It's real and it's having a major economic impact. We've even created a job polarization category because we're writing about it so much.

Expect to see and hear much more about income inequality, living wages, minimum wage increases and unfair labor practices in the coming months.

November 13, 2013

As the chart below - from the New York Times article Three Questions on the Jobs Picture - shows, it's down to levels we haven't seen since the 1970's (the blue line is the actual data as reported by the BLS, the red line is the trend).

Demographics explain part of the decline. Aging baby boomers, a big demographic cohort, are retiring and leaving the work force. But this only explains part of the decline. Key quote from the article:

Researcher have shown that some of the drop is to be expected given our aging demographics, but not this much. (I’d say half, at most, can be attributed to demographics, and probably more like one-third.)

But a big question that still remains is where are the folks aged 25-54 going? In 2007 54% of Americans aged 25-54 were working. Today the percent has declined to 51%.